Classification of "Fanta Fruity Orange" under GST rates modified by GAAR

The case involved the classification of "Fanta Fruity Orange" under tariff headings and the applicability of Goods and Services Tax (GST) rates. The General Authority for Advance Ruling (GAAR) ruled that "Fanta Fruity Orange" should be classified under Sub-heading 2202 10 as "Other non-alcoholic beverages" instead of Tariff Item 2202 99 20. The product was deemed to attract a GST rate of 28% and a Compensation Cess rate of 12%. The original ruling was modified accordingly.

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Issues Involved:
1. Classification of "Fanta Fruity Orange" under the appropriate tariff heading.
2. Applicability of Goods and Services Tax (GST) rate for "Fanta Fruity Orange."

Issue-wise Detailed Analysis:

1. Classification of "Fanta Fruity Orange":

Sub-heading 2202.10:
- The appellant argued that "Fanta Fruity Orange" should be classified under Tariff Item 2202 99 20 as "Fruit pulp or fruit juice based drinks." However, the GAAR ruled that the product should be classified under Tariff Item 2202 99 90 as "Other non-alcoholic beverages."
- The manufacturing process involves using orange juice concentrate (1.6%) reconstituted to 10.5% orange juice, blended with sugar syrup, additives, and preservatives, and then carbonated.
- The product label indicates it contains carbonated water, sugar, orange juice concentrate, acidity regulators, preservatives, stabilizers, sweeteners, synthetic food color, and added orange flavors.
- The Explanatory Notes of HSN for Sub-heading 2202 10 include beverages like orangeade, which consist of ordinary drinking water, sweetened or not, flavored with fruit juices, essences, or compound extracts, often aerated with carbon dioxide gas.
- The product "Fanta Fruity Orange" conforms to this description, containing carbonated water, sugar, sweetener, orange juice concentrate, and added orange flavors, and is presented in PET bottles.
- Therefore, "Fanta Fruity Orange" is appropriately classifiable under Sub-heading 2202 10 as it fully conforms to the description given in Explanatory Notes of HSN for Sub-heading 2202 10.

Tariff Item 2202 99 20:
- The appellant contended that the product should be classified under Tariff Item 2202 99 20 as "Fruit pulp or fruit juice based drinks" due to its 10.5% orange juice content.
- The GAAR, however, concluded that Tariff Item 2202 99 20 does not cover drinks made from fruit juice concentrates, relying on the appellant's own case (Hindustan Coca Cola Beverages P. Ltd. Vs. Commissioner of Central Excise, Chennai-IV), where it was decided that "concentrate" based drinks do not fall under "Fruit pulp or fruit juice based drinks."
- The Explanatory Notes of Heading 20.09 clarify that "juices" of this heading would cover "concentrated juices," but this clarification is specific to Heading 20.09 and cannot be applied to other headings.
- The GAAR's conclusion that "Fanta Fruity Orange" does not fall under Tariff Item 2202 99 20 is confirmed, as the product is not manufactured from "Fruit pulp" or "Fruit juice," but from "Orange Juice Concentrate."

Tariff Item 2202 99 90:
- The GAAR initially classified "Fanta Fruity Orange" under the residuary entry of Tariff Item 2202 99 90 as "Other non-alcoholic beverages."
- However, given that the product is appropriately classifiable under Sub-heading 2202 10, the classification under Tariff Item 2202 99 90 does not arise.

2. Applicability of Goods and Services Tax (GST) Rate:
- The product "Fanta Fruity Orange" is classifiable under Sub-heading 2202 10.
- The applicable GST rate is 28% (CGST 14% + GGST 14%) as per S. No. 12 of Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017.
- Additionally, a Goods and Services Tax Compensation Cess rate of 12% as per S. No. 2 of Schedule of Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 is applicable to the product.

Conclusion:
The Advance Ruling No. GUJ/GAAR/RULING/07/2019 dated 30.03.2019 is modified to classify "Fanta Fruity Orange" under Sub-heading 2202 10 with a GST rate of 28% and a Compensation Cess rate of 12%.

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